12/30/10…who’ll buy my stocks?

…by now many of you are thinking that TB is negative on stocks…that is not true: he is negative on the stock market, specifically the ‘market makers’ (sic), or more accurately market manipulators.

It seems he is in good company judging from net redemptions from stock mutual funds which are going unabated – U.S. stock mutual funds that is while emerging market funds continue to attract investors. Floyd Norris did a good job on this – to a point – but he forgot to look at flows in stock ETF’s, without which one cannot get an accurate picture.

Is it disgust with U.S. stocks, the way the market is run, or merely the high fees and tax ‘penalties’ of investing in mutual funds that is causing the swift departure? It is very clear that the man on the street is however disgusted with Wall Street and its everlasting greed at the expense of Main Street…and if you are not, then you just don’t get it! How many insider trading scandals…and these are not the Martha Stewart variety either…does it take before you realize the game is rigged – against you, the long-term investor. How many times will you continue to buy and hold ‘growth stocks’ which are a pure bet on the future, while shunning solid dividend paying stocks that can easily deliver 3-5% dividends…and even more, often much more?

We live in a world that is stacked in favor of the speculator…which is too kind because when you control the game you aren’t the speculator, you are the house, and anyone who has been to Vegas knows the house does not lose…other than investors in ‘the house’ who are trumped by the management!

Les Leopold also wrote a damning article on the Huffington Post on the ten biggest lies of Wall Street in 2010…and when you read them you realize you knew that but chose to ignore it…they, in an incredible game of three-card Monty managed to convince you it is governments fault that they failed…that the bailout cost Americans nothing, and that they need preferential tax rates on their personal income which is taxed at the 15% capital gains rate instead of the 35% maximum, but who cares…it is good for America…just ask Steven Schwarzman who was nearly in tears testifying to Congress on how private equity would dry up without that 15% tax rate…are we nuts? Well, apparently the GOP is as they stalwartly defend low taxes for the wealthiest Americans…no taxpayer left behind even as they make a budget deficit and record wealth gap even further.

Yesterday, John Sperling, a former humanities professor at San Jose State University who taught remedial reading to latino students and founded the Apollo Group, a for-profit university where he is the highest paid college president in the U.S. and world…at 130 times the average salary of private college presidents!

Ah, but they are doing good things…80% plus of their revenue comes from federal student loans (the for-profits are now being prohibited from recruiting students for their student loan potential!). These ‘schools’ enroll 12% of the students in the U.S. now but receive 25% of the Pell Grants! Furthermore the default rate on for-profit student loans is double the other schools…you…we…are subsidizing them making them wealthy and creating a lot of hopefuls who are finding their career dreams dashed when they enter the real world. Of course this is not true of all curricula but what about the electricians, and other trades they are pushing through with no experience when there are journeymen electricians out there who are suffering double digit unemployment?

The point is, we are looking for a quick fix to our problems and there is none. Already we are proud that the consumer is back…but what is he spending? His home equity? Credit cards? His pay raises? Certainly not his savings as he has none…zero…zip…zilch! We are fools and as we all know a fool and his money are soon parted. So how much longer can we pursue this game of blind man’s bluff? …until we no longer can! …and that folks is where TB believes we are headed.

As for stocks…how long can earnings continue to improve? The analysts seem to believe forever…but they have been wrong before and for one simple reason: they are paid to be bullish on stocks! Always! Like realtors…did a realtor ever tell you it was a bad time to buy a home?

TB does not like to be a perma-bear but if we can’t see what is happening we deserve what we get: disappointment and losses.

Now to yesterday’s markets. How do you get a major rally of bonds? More than 2-1/2 points on the long end!!! Well…you take a thin market…you beat it up due to the last two treasury auctions of the year which settle on 12/31…then you get it so cheap that it only has one way to go – UP! and that forces shorts to cover…of course the dog has now hunted and we are taking them back down overnight…what’s a mother to do?

Dollar remains weak gold closed at $1413.50 and crude closed above $91 for a second straight session. Stocks managed to close ever so slightly higher on weak volume with no conviction (perhaps the insiders will get conviction though…one can hope). It’s a jungle out there!

12/17 2.02B – Quadruple witching! Highest volume since 6/25/10

12/20 829M

12/21 811M

12/22 784M

12/23 617M

12/27 468M – 2nd lowest of 2010, 11/26’s 428M was THE low of year and 3rd lowest since the 12/24/09 319M day which was lowest in decades!

12/28 560M

12/29 520M

12/30 ???

. . . - - - . . .    . . . - - - . . . (S.O.S.)

Last night TB got his initiation to Minneapolis/St. Paul culture. He went with a group to the Ordway theatre in St. Paul to see Joseph (coincidentally his grandson’s name). It is a beautiful theatre in the old style yet with a modern mix…several levels of balconies with boxes.

Across the street is Rice Park…where all the trees are lit and where the ice sculptures are on exhibit during the Winter Carnival. It looks spectacular…

Living in a winter wonderland…and loving it! Ah, for he rains of California though…

Two more days left in 2010…enjoy them!


Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries...as he sees it...and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Copyright TBD Capital LLC, December 30, 2010.


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